Technology | Media | Telecommunications

Thursday, April 16, 2015

OTT Television Ad Revenue will Reach $40 Billion

Over-the-Top (OTT) content distribution has been a disruptive force in an otherwise status-quo video entertainment market. As the viewership of traditional linear broadcast TV continues a slow decline in mature markets, advertisers are seeking other ways to reach consumers.

Revenue from OTT television program advertising -- that is, commercial advertising placed in full-length TV-quality programming delivered via broadband -- is expected to grow nearly four fold between 2015 and 2020, according to the latest market study by TDG.

Their worldwide market study produced what represents the first publicly-available advertising forecast associated exclusively with the delivery of OTT TV content.

According to the TDG assessment, the average ad load for a 30-minute legacy linear program will decline by 38 percent between 2014 and 2020, from approximately eight minutes to around five minutes.

During the same forecast period, average OTT TV ad loads will increase 63 percent, from 3.2 minutes to 5.1 minutes, bringing OTT TV ad loads in line with that of legacy linear TV.

TDG believes that this shift in advertising load is not all bad for content networks.

"The value of legacy linear TV advertising in 2020 will be worth considerably more than today," said Alan Wolk, senior analyst at TDG.

New forms of advertising such as native and sponsored promotions could generate additional revenue and keep total TV ad revenue somewhat stable through 2020 -- producing zero growth in total revenue, but no decline, even as more ad budgets are shifted to OTT TV.

By 2020, OTT TV ad revenue will be approximately $40 billion, just under half of the 2020 projected $85 billion in total TV ad revenue. What's not clear, however, is if marketers will continue to invest in any form of advertising, when there are more effective means of reaching potential customers.

The TDG market study included an in-depth examination of the trends driving and inhibiting the shift from legacy to OTT TV advertising, as well as detailed forecasts for total TV ad revenue.